Exam 18: Externalities, Open-Access, and Public Goods

You are having a party and one of your guests lights up a cigar without asking.Explain why this creates an externality.

To maximize welfare in a competitive market that has a negative externality in production,government should tax a pollution-generating good at a specific tax equal to the marginal cost of producing the good.

Your new neighbor does not mow his lawn or prune the trees in his front yard.As a result,your house value decreases.Your neighbor generated

-The above figure shows the marginal benefit from pollution for two firms.If both firms receive a marketable permit to pollute 25 units of pollution each,how much will each firm pollute and how much will a permit for one unit of pollution be worth?

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If the chemical firm owns the lake,and the beach owner must pay $10 to keep the chemical firm at just one ton of pollution,then

The existence of externalities is due mainly to the fact that

-The above figure shows the market for steel ingots.If the market is competitive,and the government institutes a $100 specific tax on steel,then

A student that asks interesting questions during the lecture generates

Explain why state governments may charge a fee for beach access to address the commons problem.

Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.

Negative externalities are created when

Which of the following goods has the property of rivalry?

In general,an externality is created when

Because a monopoly ignores external costs,it is possible that it will

The efficient quantity of a public good occurs when the marginal cost of providing that good equals the sum of the marginal benefits to all individuals.

Which of the following is not a common property?

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If the firm owns the river and there is just one neighbor affected by the pollution,how much pollution is likely to occur?

Positive externalities are created when

The median voter votes yes for a project if

Which of the following is NOT a club good?